How to Boost U.S. Economy

The new McKinsey report says “structural problems have been brewing in the U.S. economy for decades” and finds it’s “time to shift the conversation toward growth-oriented policies that can mobilize investment and job creation”. To this end it identifies five catalysts for growth and describes their possible impacts till 2020.

1. Shale-gas and -oil production (GDP: $380 billion to $690 billion by 2020)
Since 2007 the production of domestic shale gas and oil has grown more than 50 % annually. A wide range of service industries benefits from expansion in the energy and manufacturing sectors.

2. Trade competitiveness in knowledge-intensive goods (GDP: $200 billion to $590 billion by 2020)
The US is one of the few advanced economies running a trade deficit in knowledge-intensive industries, like automobiles, commercial airliners, medical devices, and petrochemicals. The report thinks that an increase in production and export is created by changing factor costs, a rebound in demand, and currency shifts that could reduce the trade deficit in these industries to its 2000 level or even close it.

3. Big-data analytics (GDP: $155 billion to $325 billion by 2020)
The digital age is creating immense amounts of data from, e.g., payment transactions, GPS trackers, sensors, and health care and government services. By 2020, the wider adoption of big-data analytics could increase annual GDP in retailing and manufacturing.

4. Investment in infrastructure (GDP: $270 billion to $320 billion by 2020 and $600 billion by 2030)
The backlog of maintenance and upgrades for US roads, highways, bridges, and transit and water systems is reaching critical levels. The annual infrastructure investment has to be increased by 1% point of GDP to erase this competitive disadvantage. The impact could grow further if the selection, delivery, and operation of infrastructure investments improve, says the report.

5. Talent development (GDP: $165 billion to $265 billion by 2020 and $1.7 trillion by 2030)
The US’s long-standing advantage in education and skills has been eroding. The report recommends to expand industry-specific training and increase the number of graduates in the fields of science, technology, engineering, and math at the postsecondary level and to enhance classroom instruction, turn around underperforming high schools, and introduce digital learning tools at the K–12 level.